Las Vegas Grand Prix faces huge cost overruns
Inflation is rising, and Formula One Group (NASDAQ: FWONA ) is having a hard time in Las Vegas.
The company has reportedly spent more than $400 million to host the Las Vegas Grand Prix, scheduled for Nov. 18. That means the costs associated with staging a third F1 race in the United States will quickly approach double the original estimate of $210 million. Despite severe cost overruns in Sin City, Formula 1 remains confident its first Sin City race in four decades will achieve its profit and revenue targets.
Despite inflationary cost pressures, we do not expect any changes to sales and earnings assumptions. We remain confident in the returns on this incredible project, which will support the additional capital investments we are making. ” Liberty Media CEO Greg Maffei said in a recent interview with Business F1.
Earlier this year, Formula One Group predicted the Las Vegas Grand Prix could generate $500 million in revenue, making it one of the most profitable events on the circuit. There's also speculation that the game's impact on the local economy will be equal to or greater than the Super Bowl in Sin City in February 2024.
Signs of inflation abound
Formula One isn't the only racing circuit battling the damaging effects of inflation, although it's unclear exactly what is causing cost overruns in Las Vegas.
It could be a toxic combination of high material costs, low labor supply and the highest interest rates in two decades, resulting in increased financing costs. Led by Sin City, Nevada posts record gross gaming revenue (GGR) figures almost every month. However, there are some signs that inflation is weighing on the gaming industry.
Some gaming industry executives have said inflation is affecting spending trends at venues across the country. This manifests itself in a variety of ways, including fewer trips to area casinos due to high gas prices, or less impulse spending in target markets like Las Vegas.
Still, there is optimism that the economic impact of the game will be significant even by Las Vegas standards, potentially contributing to one of the busiest weekends in the city's history.
Concerns about housing prices
When the date for the Las Vegas Grand Prix was officially confirmed, Las Vegas Strip operators saw a surge in hotel room bookings and increased prices. Since then, there has been some hesitation on that front, leading to speculation that the event might not bring the expected benefits to gaming companies. Truist Securities analyst Barry Jonas addressed the topic in a recent note to clients.
Most premium room packages are already booked (many with no or more limited cancellation policies)," Jonas wrote.
Jonas added that gaming executives expect the Nov. 20 weekend to be "one of the highest-grossing gaming events in the history of the city," noting that the majority of the decline in room rates occurred during race weekends and was generally concentrated in the higher-income areas. Low price/economy class hotel.
Read also:
- Football 101: What is relegation in football?
- UK gambling tax plan just Trojan horse: Gambling Commission
- New Zealand considering tax on offshore gaming operators
- Los Angeles Lakers eyeing DeMar DeRozan in trade with Chicago Bulls
Source: www.casino.org
